On October 14, 2020, the Secretary of State submitted a report to Congress pursuant to section 5(a) of the Hong Kong Autonomy Act (HKAA). In response, the Department of the Treasury’s Office of Foreign Assets Control published Frequently Asked Questions 848 – 851 to provide further information on the Department of the Treasury’s reporting requirements under the HKAA. OFAC also added ten additional names to its Specially Designated Nationals List pursuant to the HKAA.
FAQ 848 explains the sanctions implications for the individuals listed in the Secretary of State’s HKAA Section 5(a) report. All persons identified by the Secretary of State in the Section 5(a) report, were also designated by OFAC on August 7, 2020 pursuant to Executive Order 13936, and , as a result, their US property and interests in property are blocked. Pursuant to Section 5(b), the Secretary of the Treasury is then required to submit a report to Congress within 30 to 60 days, that identifies any foreign financial institution (FFI) that knowingly conducts a significant transaction with persons identified in the Secretary of State’s Section 5(a) report. Transactions are not considered “significant” if made within 30 days of the 5(a) report that constitutes a good-faith wind down period. Any FFI that knowingly conducts a significant transaction with persons identified in a section 5 (a) report, is potentially subject to mandatory secondary sanctions under the HKAA. Sections 7(a) and 7(b) of the HKAA determine the type of sanctions and the number of sanctions to be imposed against an FFI.
In FAQ 849, OFAC addresses the conditions under which an FFI can be removed from a Section 5(b) report, and FAQ 850 and 851 provide key term definitions, including a discussion on the types of transactions that are deemed “significant” under Section 5(b).